1 Since 1 January 2018, Swisscom has applied IFRS 15 “Revenue from Contracts with Customers”. The prior year’s figures have not been adjusted. Without the application of IFRS 15, net revenue would have been CHF 4 million higher (Swisscom Switzerland CHF 3 million and Fastweb CHF 1 million) and EBITDA would have been CHF 50 million higher (Swisscom Switzerland CHF 28 million and Fastweb CHF 22 million) in the first nine months of 2018.

2 Operating income of segments includes ordinary employer contributions as pension fund expense. The difference to the pension cost according to IAS 19 is recognised as a reconciliation item.

Swisscom Switzerland

In CHF million, except where indicated

3. quarter2018

3. quarter2017

Change

1.1.–30.9.2018

1.1.–30.9.2017

Change

Net revenue and results

Telecom services

1,560

1,615

–3.4%

4,689

4,868

–3.7%

Solution business

248

264

–6.1%

768

796

–3.5%

Merchandise

171

142

20.4%

504

434

16.1%

Wholesale

148

157

–5.7%

434

430

0.9%

Other revenue

45

49

–8.2%

137

148

–7.4%

Revenue from external customers

2,172

2,227

–2.5%

6,532

6,676

–2.2%

Intersegment revenue

19

23

–17.4%

59

61

–3.3%

Net revenue 1

2,191

2,250

–2.6%

6,591

6,737

–2.2%

Direct costs

(494)

(491)

0.6%

(1,408)

(1,367)

3.0%

Indirect costs

(822)

(850)

–3.3%

(2,522)

(2,609)

–3.3%

Segment expenses

(1,316)

(1,341)

–1.9%

(3,930)

(3,976)

–1.2%

Segment result before depreciation and amortisation (EBITDA) 1

875

909

–3.7%

2,661

2,761

–3.6%

Margin as % of net revenue

39.9

40.4

40.4

41.0

Depreciation, amortisation and impairment losses

(376)

(369)

1.9%

(1,138)

(1,115)

2.1%

Segment result

499

540

–7.6%

1,523

1,646

–7.5%

Operational data at end of period in thousand

Fixed telephony access lines

1,846

2,128

–13.3%

Broadband access lines retail

2,030

2,000

1.5%

Swisscom TV access lines

1,510

1,453

3.9%

Mobile access lines

6,590

6,582

0.1%

Revenue generating units (RGU)

11,976

12,163

–1.5%

Unbundled fixed access lines

91

114

–20.2%

Broadband access lines wholesale

472

419

12.6%

Capital expenditure and headcount

Capital expenditure in property, plant and equipment and intangible assets

1,102

1,083

1.8%

Full-time equivalent employees at end of period (number)

14,550

15,307

–4.9%

1 Since 1 January 2018, Swisscom has applied IFRS 15 “Revenue from Contracts with Customers”. The prior year’s figures have not been adjusted. Without the application of IFRS 15, net revenue would have been CHF 3 million higher and EBITDA would have been CHF 28 million higher in the first nine months of 2018.

Net revenue for Swisscom Switzerland fell by CHF 146 million or 2.2% to CHF 6,591 million in the first nine months of 2018. Revenue from telecommunications services was down CHF 179 million or 3.7% to CHF 4,689 million as a consequence of the drop-off in fixed-line telephony and pressure on prices. Of this decline, CHF 133 million (–3.3%) was attributable to the Residential Customers segment and CHF 46 million (–5.5%) to the Enterprise Customers segment. In the solution business, net revenue decreased by CHF 28 million or 3.5% to CHF 768 million due to strong competition and lower volumes in the banking sector. The growth in merchandise revenue of CHF 70 million or 16.1% to CHF 504 million is largely a result of the higher number of mobile devices sold. Incoming orders received by Enterprise Customers amounted to around CHF 1.5 bil­lion (+16.3%) in the first nine months of 2018.

The number of revenue generating units decreased by 187,000 or 1.5% to 12 million, chiefly as a result of the downward trend in fixed-line telephony. Year-on-year, the number of fixed-line telephony connections fell by 282,000 or 13.3% to 1.85 million. In the saturated market, subscriber numbers in mobile telecommunications remained flat. The number of mobile access lines was largely unchanged from the previous year at 6.6 million (+0.1%), with postpaid lines increasing by 66,000 and prepaid lines falling by 58,000. Among bundled products, the trend towards inOne continued: at the end of September 2018, inOne had around 2.12 million customers (+779,000 in the first nine months of 2018). The number of broadband and TV connections also increased further. Compared to the prior year, broadband connections rose by 30,000 or 1.5% to 2.03 million, while Swisscom TV connections grew by 57,000 or 3.9% to 1.51 million.

Segment expense declined by CHF 46 million or 1.2% to CHF 3,930 million, with an increase in direct costs offset by a decrease in indirect costs. The rise in direct costs of CHF 41 million or 3.0% to CHF 1,408 million is due to the volume-driven higher costs to purchase products. Indirect costs fell by CHF 87 million or 3.3% to CHF 2,522 million, driven by cost savings. Cost savings continue to be achieved principally through a streamlining of work processes and an ongoing reduction of job vacancies in declining business areas. Headcount fell year-on-year by 757 FTEs or 4.9% to 14,550, including 607 FTEs in the first nine months of 2018. The costs saved were partially able to make up for the decline in revenue. Accordingly, the segment result before depreciation and amortisation was CHF 100 million or 3.6% lower at CHF 2,661 million. Capital expenditure was practically unchanged from the previous year at CHF 1,102 million (+1.8%).

Fastweb

In EUR million, except where indicated

3. quarter2018

3. quarter2017

Change

1.1.–30.9.2018

1.1.–30.9.2017

Change

Residential Customers

264

253

4.3%

785

723

8.6%

Corporate Business

190

177

7.3%

558

518

7.7%

Wholesale

49

58

–15.5%

168

166

1.2%

Revenue from external customers

503

488

3.1%

1,511

1,407

7.4%

Intersegment revenue

2

3

–33.3%

5

7

–28.6%

Net revenue 1

505

491

2.9%

1,516

1,414

7.2%

Segment expenses

(332)

(321)

3.4%

(1,033)

(841)

22.8%

Segment result before depreciation and amortisation (EBITDA) 1

173

170

1.8%

483

573

–15.7%

Margin as % of net revenue

34.3

34.6

31.9

40.5

Depreciation, amortisation and impairment losses

(123)

(128)

–3.9%

(373)

(389)

–4.1%

Segment result

50

42

19.0%

110

184

–40.2%

Capital expenditure in property, plant and equipment and intangible assets

432

441

–2.0%

Full-time equivalent employees at end of period (number)

2,470

2,509

–1.6%

Broadband access lines in thousand

2,518

2,421

4.0%

Mobile access lines in thousand

1,324

989

33.9%

1 Since 1 January 2018, Swisscom has applied IFRS 15 “Revenue from Contracts with Customers”. The prior year’s figures have not been adjusted. Without the application of IFRS 15, net revenue would have been EUR 1 million higher and EBITDA would have been EUR 19 million higher in the first nine months of 2018.

In the first nine months of 2018, Fastweb posted an increase in net revenue of EUR 102 million or 7.2% to EUR 1,516 million thanks to customer growth. Despite difficult market conditions, Fastweb’s broadband customer base grew by 97,000 or 4.0% year-on-year to 2.52 million. Fastweb is also growing in mobile telephony. Compared to the previous year, the number of mobile access lines increased by 335,000 or 33.9% to 1.32 million. Although competition in the Residential Customers segment remains strong, the average revenue per broadband customer was stabilised versus the prior year. Residential customer revenue rose by EUR 62 million or 8.6% to EUR 785 million as a result of customer growth. Despite the high level of competition, Fastweb held its strong position in the market for business customers. Revenue from business customers was up EUR 40 million or 7.7% to EUR 558 million. Revenue from wholesale business increased by EUR 2 million or 1.2% to EUR 168 million.

The segment result before depreciation and amortisation was EUR 90 million or 15.7% lower at EUR 483 million. In the previous year, one-off income from legal disputes amounting to EUR 95 million was received. EBITDA increased by 5.0% on a like-for-like basis, while the EBITDA margin contracted by 0.7 percentage points to 33.1%. The increase as a result of revenue growth was partially offset by a non-recurring item resulting from the regulatory conditions in the previous year. The expansion of Italy’s ultra-fast broadband network is continuing as planned. Capital expenditure remains at a similarly high level as the previous year, totalling EUR 432 million (–2.0%). Fastweb’s headcount was practically unchanged year-on-year at 2,470 FTEs (–1.6%).